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Huobi, a leading digital currency trading platform in China, strengthened risk warning system for users' BTC withdrawal request. However, the following day the cryptocurrency, now ranked 5th by market cap, showed a significant correction. ICOs surprisingly popular Initial coin offerings have found favor with the unlikeliest of supporters.

China's central bank officially banned several organizations - as well as individuals - from raising funds through the use of Initial Coin Offerings, or commonly referred to as ICOs. In July, the US Securities and Exchange Commission ruled that tokens issued via ICOs are subject to the same regulation as other securities.

Scepticism has risen in recent months as more startups have begun to turn to ICOs as a fundraising mechanism, despite the risk of "pump-and-dump" scams as well as the lack of regulatory protections leading to alleged frauds.

The sell-off also caused Bitcoin (the first cryptocurrency) to reverse the gains that took it over $5000 for the first time on September 2, dropping it to $4400.

Once again cryptocurrency has proved its volatility - after growing by more than 800% this year, all the major cryptocurrencies are now pointing downwards right after the China's announcement of ICO ban.

Additionally, cryptocurrency exchanges and token trading platforms in China are no longer allowed to enable ICO participation for their clients.

It's unclear at this point and time if and when China will decide to relax these restrictions on initial coin offerings. But Sheng said that blockchain technology should be supported and that China could be a global leader in the adoption of the technology.

Reaction to the ban was swift online.

"Hurry up and sell your bitcoin", said another.

In June, the Bancor token project based on the Ethereum blockcain raised $154m in an ICO.

But Bussman said that once there was some regulatory clarity, and once it had been worked out how to classify different types of ICO, the token-based fundraising would continue. ALIS, a social media venture in Hong Kong headed by a Japanese entrepreneur, launched a coin offering in Japan on Friday but announced via Twitter on Monday that it was suspending its Chinese site and that one Chinese team member would leave.

"This is not the end of the ICO - absolutely not".